Commercial Solar Tax Credits: What You’ll Learn
Whether the federal Investment Tax Credit still applies to commercial solar after the July 4, 2026 begin construction deadline
The December 31, 2027 placed in service deadline that now governs new projects
What safe harbored projects (construction begun by July 4, 2026) still qualify for
How MACRS and 100 percent bonus depreciation reduce the net cost of a system
What Direct Pay is and which organizations qualify
Why battery storage keeps its tax credit long after solar’s phases out
State incentive stacks in PA, NJ, and DE that layer on top of federal credits
How Foreign Entity of Concern (FEOC) rules affect equipment sourcing
Are Commercial Solar Tax Credits Still Available?
Yes. The July 4, 2026 begin construction deadline has passed, but the 30 percent federal solar tax credit under Section 48E is still available for commercial solar projects, the qualification path has simply changed.
Projects that began construction by July 4, 2026 locked in the credit and have up to four years to be completed. Projects starting now can still claim the full 30 percent credit, but they must be placed in service by December 31, 2027. For most commercial rooftop and ground mount systems in Pennsylvania, New Jersey, and Delaware, that is a workable timeline, if the project starts soon.
Combined with depreciation, many companies still recover close to half the system cost through tax benefits alone, since the credit directly reduces federal tax liability on qualifying costs. But the window is no longer open ended, and it will not reopen. A project that slips past the end of 2027 loses federal credit eligibility entirely.
The Section 48E Investment Tax Credit: What It Covers
Section 48E, the investment tax credit itc, allows eligible businesses to claim 30 percent of qualified solar installation costs as a dollar for dollar reduction in federal tax liability. The credit applies to panels, inverters, racking, wiring, battery storage installed with solar, and labor.
Projects over 1 MW must meet prevailing wage and registered apprenticeship requirements to receive the full 30 percent base rate. Projects under 1 MW automatically qualify for the full rate.
Commercial systems under 1 MW can also qualify for additional credit adders. Each adder can increase the total credit by 10 percent:
Domestic content adder: Up to 10 percent for U.S.-manufactured components
Energy community adder: 10 percent for brownfield sites or communities affected by coal plant closures or fossil fuel employment declines
Low-income community adder: 10 to 20 percent for qualifying projects in designated low-income areas (application-based)
By meeting additional requirements, businesses may raise the credit to around 50 percent through bonus credits or bonus tax credits, and certain projects can exceed 50 percent, though most installations in PA, NJ, and DE will land in the 30 to 40 percent range.
The Deadlines That Matter Now
The One Big Beautiful Bill Act (signed July 4, 2025) accelerated the phase out of clean energy credits. The residential credit under Section 25D ended December 31, 2025. For commercial projects under Section 48E, there are now two distinct tracks.
Track 1: Projects That Began Construction by July 4, 2026
If your project began construction on or before July 4, 2026 through the Physical Work Test, or through the 5 percent safe harbor for systems of 1.5 MW AC or smaller, the credit is locked in. The project qualifies for the full 48E credit as long as it is placed in service within four calendar years, generally by December 31, 2030.
If you safe harbored a project before the deadline, the priority now is documentation and continuity. Keep accurate records proving when physical work of a significant nature started or when costs were paid or incurred, since accurate project documentation is crucial for IRS audit compliance, and keep the project moving, the continuity requirement means construction activity cannot stall indefinitely. Placing the system in service within the four year window satisfies continuity automatically.
Track 2: New Projects Starting After July 4, 2026
Projects beginning construction now qualify for the full 30 percent credit only if they are placed in service by December 31, 2027 – meaning installed, inspected, interconnected, and granted permission to operate.
That sounds tight, and for utility scale projects it is. But typical commercial rooftop and carport systems in our region move from contract to interconnection in roughly 6 to 12 months. A project that signs in 2026 or early 2027 has a realistic path to the credit. The real risk is waiting: as the 2027 deadline approaches, equipment demand, installer capacity, and utility interconnection queues will all tighten at once.
Why There Is No Third Option
After December 31, 2027, no new solar projects qualify for the Section 48E credit, regardless of size or start date. There is no phase down or step down rate, eligibility simply ends. Industry analysis suggests third-party financing costs under power purchase agreements and solar leases for non-qualifying projects could rise 40 to 50 percent once credits disappear, which is why owned systems placed in service in 2027 represent the last window at current economics.
MACRS Depreciation and Bonus Depreciation
The Investment Tax Credit is not the only federal tax benefit. Businesses can also deduct the system cost through accelerated depreciation under the Modified Accelerated Cost Recovery System (MACRS). If a business cannot use the full ITC in the current tax year, unused tax credits can generally be carried forward for up to 22 years to maximize benefits.
Solar equipment is classified as 5 year MACRS property, allowing the depreciable basis to be written off over approximately six tax years using an accelerated schedule front loading deductions into early years.
When ITC and MACRS are combined: After claiming the 30 percent ITC, the depreciable basis is reduced by half the credit amount, leaving approximately 85 percent of the original cost available for depreciation. The One Big Beautiful Bill Act made 100 percent bonus depreciation permanent, allowing the entire depreciable amount to be deducted in year one.
On a $500,000 commercial solar installation, this combination typically recovers $150,000 through the ITC and tens of thousands more through first year depreciation, depending on the business’s tax rate and structure. For many companies, the net cost after tax benefits is roughly 45 to 55 percent of the gross installation price.
Important distinction: MACRS and bonus depreciation do not expire with the ITC. Even after 2027, solar remains depreciable property, but losing the 30 percent credit removes the single largest line item in the tax benefit stack.
Battery Storage: The Credit That Isn’t Going Away
While the solar ITC is winding down, energy storage was spared. Battery storage systems, whether paired with solar or standalone, remain eligible for the full Section 48E credit for projects beginning construction through 2033, with a gradual phase down after that.
This matters for two reasons:
Pairing storage with a 2027 solar project adds credit eligible basis and improves the economics of demand charge reduction, which can help a commercial building lower long-term utility costs.
After the solar deadline passes, storage becomes the primary federally incentivized upgrade. A building that misses the solar window can still capture a 30 percent credit on a battery system for years to come.
FEOC sourcing rules (below) apply to storage as well, so battery chemistry and supplier selection matter for credit eligibility.
Foreign Entity of Concern Rules
Starting January 1, 2026, projects must comply with Foreign Entity of Concern (FEOC) restrictions to remain eligible for the Section 48E credit. These rules limit the use of components sourced from entities connected to China, Russia, Iran, or North Korea.
For projects beginning construction in 2026, prohibited material assistance from FEOC sources cannot exceed 60 percent of total manufactured product costs meaning at least 40 percent must come from non-FEOC sources. That threshold tightens annually for later construction starts.
Businesses planning projects now should work with solar developers or a solar installer that can provide certification safe harbor support from suppliers for foreign-content compliance, along with the required FEOC documentation. Projects that began construction before December 31, 2025 are exempt from these restrictions.
Direct Pay for Tax Exempt Organizations
Direct Pay (Section 6417) allows tax exempt entities to receive the Section 48E credit as a cash payment from the IRS rather than a tax deduction, with direct payment serving as the cash-refund option for eligible entities. This makes the commercial solar credit accessible to nonprofits, churches, schools, hospitals, local governments, tribal governments, and rural electric cooperatives.
After installing a qualifying solar system, the organization registers with the IRS, receives a registration number, and claims the credit on its tax return, typically Form 990-T. Nonprofits generally must file for Direct Pay by May of the following year when they submit the relevant return and registration information. The IRS then issues a refund equal to the credit amount. For a $200,000 system, that would be a $60,000 cash payment at the 30 percent rate.
Direct Pay follows the same deadlines as the standard Section 48E credit. For tax exempt organizations starting a project now, that means the system must be placed in service by December 31, 2027. Because nonprofit decision cycles often run long, boards evaluating solar should treat 2026 as the decision year; not 2027.
Read the full guide to Direct Pay for nonprofits and government entities
Rising Electric Rates Raise the Stakes
The tax credit deadline is only half the story. The other half is what businesses in this region are now paying for electricity.
Wholesale capacity prices in PJM, the grid operator serving PA, NJ, and DE, have surged more than 800 percent across recent auction cycles, hitting the price cap, driven by data center demand growth, plant retirements, and interconnection delays. Those costs flow directly into commercial electric bills:
Pennsylvania: PECO rates are around 20 cents per kWh, up more than 20 percent since early 2025, with PPL, Met-Ed, Penelec, and Duquesne Light in a similar range
New Jersey: PSE&G is around 26 cents per kWh after a 17 percent increase in 2025; JCP&L rose over 20 percent, the steepest jump in the state
Delaware: Delmarva Power is around 20 cents per kWh and climbing with the same PJM cost pressures
Every rate increase shortens solar payback periods. A system quoted at a 7 year payback in 2024 may pencil at 5 to 6 years today, before the tax credit is even applied. The combination of peak electric rates, rising energy costs, and the final window for the 30 percent credit is why 2026–2027 project economics are the strongest this region has seen.
See current electricity rates by utility in PA, NJ, and DE
State Incentives That Stack With Federal Credits
Federal tax credits are the largest single incentive, but state level programs can stack with federal incentives, add meaningful value, and none of them are affected by the federal phase out. Here is what is available in PA, NJ, and DE.
New Jersey
New Jersey offers one of the strongest commercial solar incentive stacks in the country. The Successor Solar Incentive Program (SuSI) pays a fixed rate of $85 per megawatt hour for qualifying solar energy production, locked in for 15 years. Commercial systems benefit from net metering (excess generation credited at full retail rates). Solar equipment is exempt from state sales tax, and the added value of a solar installation is excluded from property tax assessments.
Learn more about solar ROI in New Jersey
Pennsylvania
Pennsylvania’s commercial solar incentives center on Solar Renewable Energy Credits (SRECs). Businesses earn one SREC for every megawatt hour of solar production; credits currently trade between $22 and $35 each. Net metering is mandated for all investor owned utilities, with commercial systems eligible up to 3 MW. Pennsylvania does not currently offer a sales tax or property tax exemption specifically for solar installations.
Learn more about solar incentives in Pennsylvania
Delaware
Delaware commercial solar incentives include the Green Energy Program grants for commercial solar installations and maintains net metering policies that credit excess production. The state also provides sales tax exemptions on solar equipment purchases.
Learn more about solar incentives in Delaware
What Businesses Should Do Now
With the begin construction deadline behind us, the placed in service clock is the only clock that matters for new projects. Every month of delay compresses the buffer between your interconnection date and December 31, 2027 — and that buffer is what absorbs supply delays, permitting slowdowns, and utility queue backlogs.
Practical Timeline:
Q3 2026: Request a Sunwise consultation and preliminary design to establish project feasibility, estimated costs, and interconnection pathway
Q4 2026: Finalize equipment selection with FEOC compliant components, execute an EPC contract, and submit permitting and interconnection applications
H1 2027: Complete installation, inspections, and utility interconnection — targeting permission to operate months ahead of the deadline, not weeks
Q1 2028: File taxes and claim the Section 48E credit for the 2027 tax year
If you began construction before July 4, 2026: Your credit is preserved with a placed in service deadline as late as December 31, 2030. Confirm your beginning of construction documentation is complete, and keep the project on a continuous schedule.
How Sunwise Can Help
Sunwise Energy designs and installs commercial solar systems across Pennsylvania, New Jersey, and Delaware. The team handles site assessment, system design, permitting, utility coordination, and installation, and works with tax advisors to ensure projects meet the December 31, 2027 placed in service deadline, maximize available tax incentives, and satisfy every qualification requirement for the Section 48E credit, including FEOC compliant equipment sourcing and documentation for safe harbored projects.
Sunwise can also help compare solar payment options that align with budget and long term energy goals, including how owned systems may access the commercial tax credit while third party ownership can limit direct eligibility.
Commercial Solar Tax Credit FAQs
Is the 30 percent commercial solar tax credit still available now that July 4, 2026 has passed?
Yes. The 30 percent Section 48E credit, also called the solar investment tax credit, remains available for eligible commercial solar projects placed in service by December 31, 2027. The July 4, 2026 date was the deadline to lock in a longer completion window, projects that began construction by then have until as late as December 31, 2030 to be placed in service.
We missed the July 4, 2026 deadline. Can we still claim the credit?
Yes, if the system is placed in service by December 31, 2027. Missing July 4, 2026 means losing the four-year completion window, not the credit itself.
Can a nonprofit or church claim the commercial solar tax credit?
Yes. The federal government provides this benefit under federal law for eligible tax-exempt entities. Tax exempt organizations can receive the credit as a cash payment through the Direct Pay provision under Section 6417. The IRS issues a refund equal to the credit amount after the organization files its tax return with the required registration number. The same December 31, 2027 placed in service deadline applies.
Does battery storage follow the same deadline?
No. Energy storage retains full Section 48E eligibility for projects beginning construction through 2033, with a phase down afterward. When storage is paired with a qualifying solar energy system before the 2027 deadline, it can increase eligible project costs and may also align with tax credit adders for commercial systems under 1 MW, with each adder generally worth 10 percent. Standalone storage remains a federally incentivized option well after the solar credit ends.
How much can a business save with the commercial solar tax credit and MACRS?
A typical commercial solar installation recovers about 45 to 55 percent of the gross system cost through the 30 percent ITC and accelerated MACRS depreciation, but the amount recovered depends on qualifying project costs, available depreciation, and the business’s tax situation. On a $500,000 system, the total cost also affects the credits available and compliance documentation, translating to roughly $225,000 to $275,000 in total tax benefits.
Do FEOC rules affect commercial solar projects in 2026?
Yes and they now apply to virtually every new project. These FEOC sourcing rules also reach other renewable projects, including wind projects, though the focus here is commercial solar. Projects that began construction after December 31, 2025 must certify that at least 40 percent of total manufactured product costs come from non FEOC sources (rising to 45 percent for 2027 construction starts). Working with an installer who sources compliant equipment is essential.
The information in this guide is for informational and educational purposes only and does not constitute legal, financial, or tax advice. We are not licensed tax advisors or financial professionals. The tax laws and regulations discussed are complex and subject to change and interpretation. Consult with a qualified tax professional to understand how these provisions apply to your organization’s specific circumstances.
